Overview
- The SEC has published a package that would modernize transfer-agent registration, recordkeeping, processing, custody and oversight to reflect electronic and distributed-ledger systems.
- The rule package includes Proposed Rule 17ad-31, which would tighten controls on restrictive legends and asks whether transfer restrictions for tokenized securities should be enforced by onchain mechanisms such as smart contracts.
- The proposal would force stronger cybersecurity, audit-trail, business-continuity and client-funds protections, including keeping client and issuer funds in separate 'for the benefit of' accounts and requiring producible, human-readable records.
- The agency makes clear that a token on a blockchain does not by itself establish legal shareholder status and that transfer agents remain responsible for the official shareholder register.
- The proposal opens a public comment period and could reshape who wins business in tokenization by favoring issuer-sponsored models and blockchain-native providers while legacy firms face new compliance obligations; next steps include comment review, staff revisions and a commissioners' vote.